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What is a Nevada Domestic Asset Protection Trust?
Nevada is one of several states that allows the creation of a Domestic Asset Protection Trust. An “Domestic Asset Protection Trust” is a special type of irrevocable trust in which a trustmaker can also be a beneficiary of the trust, and enjoy asset protection for the assets the trustmaker puts into the trust. Most states, like Texas, do not allow a trustmaker to also be a beneficiary of the trust and enjoy asset protection (these are called “Self-Settled” trusts). The purpose of an Asset Protection Trust is to keep the trust assets secure for the beneficiaries instead of being exposed to the beneficiary’s creditors, divorces, or other risks.
What are Two Types of Domestic Asset Protection Trusts?
The two forms of Asset Protection Trusts are “Third Party” trusts and “Self-Settled” trusts. A “Third Party” trust is set up by one person for the benefit of another person, while a “Self-Settled” trust is set up by one person for their own benefit. Both of these Asset Protection Trusts are designed to protect your family’s wealth according to your specific needs.
I Live in Texas; can I still have a Nevada Domestic Asset Protection Trust?
Yes! According to Nevada law, some of the requirements to establish a Nevada Domestic Asset Protection Trust are: at least one trustee must be a resident of the state of Nevada, and you must have some assets in the state of Nevada. There are a few other technical requirements that are drafted within the trust documents to comply with Nevada law.
Once I transfer assets into my Nevada Domestic Asset Protection Trust, are they protected against my creditors immediately?
Under Nevada law, your “existing creditors” have two years to challenge the transfer of your assets into the trust as a “fraudulent transfer” with the intent to hinder or delay that particular creditor, which is a very high standard to prove. As for “future creditors,” the moment you transfer assets into the Nevada Domestic Asset Protection Trust they are protected!
What are some additional tips to consider?
Domestic Asset Protection Trusts that are made for inheritance protection can be very flexible. For example you can make trust distribution standards very limited or as broad as you want. Another example is making the funds available for medical bills or higher education only. Or, the Trustee can be given broad discretion to make distributions in the best interest of the beneficiary. Finally, it is important to plan in advance so that your loved ones don’t have to worry about any complications due to a lack of proper planning.
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Nevada Domestic Asset Protection Trusts!
